Low mortgage rates aren’t enough to boost new home sales, say economists. There are insidious factors to blame for sluggish growth in the housing industry: national home foreclosure forecasts and high unemployment.
The net effects of the housing crisis in 2008 persist. New and old neighborhoods and home developments continue to be subject to the negative effects of high foreclosure rates and the bloated stock of bank-owned homes.
Bloated housing stock keeps bad for home value nationally
While these millions of bank-owned homes stand uninhabited, they are a supply nightmare, suffocating demand and new growth. What’s worse, anyone looking to build a new home can expect to pay exactly what that home is worth. Most new homeowners shouldn’t expect an increase in their new property’s value in the coming years either.
Unemployment a conundrum, new jobs still elusive
Unemployment lingers at nine percent. This is an obvious contributor to the huge increase in foreclosures and the overstock of bank-owned houses. Once the economy enters a phase where jobs are being recovered, the millions of people directly and indirectly impacted by job and home loss will be skeptical about buying a new home. Expect more renters as the economy gains jobs.
It is hard to pin down a ‘first mover’ of this continued crisis. Many are faced with the job-residence conundrum which says, “I need a job to buy a home,” and “I need a home to get a good job.” This is a nice summation of the cyclical nature of nationally depressed house values and high unemployment numbers. Until the economy moves in a big way outside of the housing sector, expect home value and new growth in the housing industry to remain low.